ACIT,Cir.-1, Aurangabad V. Jindal seeds co. Pvt. Ltd., Jalna

ITA 187/PUN/2010

• Counselvise Citation: 18724514 RSA 2010
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-07-2011
• Assessment Year: 1999-2000
• Appeal Filed On: 01-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SANJAY SINGH
• Keywords: Depreciation; Reason to believe

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE SHRI I.C. SUDHIR (JM) AND SHRI G.S. PANNU (AM) ITA NOS. 187 & 188/PN/2010 (ASSTT. YEARS : 1999-00 & 2000-01) THE ASSTT. COMMISSIONER OF INCOME TAX ... APP ELLANT CIRCLE-1, AURANGABAD V. JINDAL SEEDS CO. PVT. LTD., RESPONDENT 29, NEW MONDHA, BUS STAND ROAD, JALNA PAN : NOT AVAILABLE APPELLANT BY : SMT. M.N. KULKARNI RESPONDENT BY : SHRI. SANJAY SINGH ORDER PER I.C. SUDHIR, JM THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER ON THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.2 8,94,389/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DEDUCTION CL AIMED U/S 80IA BY THE ASSESSEE. 2. THE CASE OF JALNA SEEDS & REFRIGERATION CO. LTD. IS TOTALLY DIFFERENT AND ON THE BASIS OF FACT AND CIRCUMSTANCE S THE ASSESSEE IS NOT ENGAGED IN MANUFACTURING ACTIVITIES. SO THE AS SESSEE IS NOT ENTITLED FOR THE DEDUCTION U/S 80 IA. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE ASSESSEE COMPANY IS ENGAGED ONLY PROCESSING. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE ENGAGED IN PROCESSING OF SEEDS FOR CULTIVATION PURPOSE WAS ALLOWED DEDUCTION U/S. 80IA OF THE ACT ON THE RETURNS OF INCOME FILED BY THEM PROCESSED U/ S. 143(1) OF THE ACT. ITA . NOS 187 & 188/PN/2010 JINDAL SEEDS CO. PVT. LTD. A.Y.1999-00 & 2000-01 PAGE OF 7 2 SUBSEQUENTLY, THE RE-OPENING PROCEEDINGS WERE INITI ATED U/S. 147 OF THE ACT BY THE A.O ON REASON TO BELIEVE THAT DEDUCTION U/S. 80IA WAS NOT ADMISSIBLE AS THE ASSESSEE IS NOT ENGAGED IN MANUFA CTURING ACTIVITY. THE A.O ACCORDINGLY DISALLOWED THE DEDUCTION OF RS. 28, 94,389/- FOR EACH OF THE A.YS. UNDER CONSIDERATION WHICH WAS ALLOWED U/S . 80IA OF THE ACT. THE LD CIT(A) HAS DELETED THESE DISALLOWANCES WITH THIS FINDING THAT ASSESSEE IS VERY MUCH ELIGIBLE FOR THE DEDUCTION CL AIMED U/S. 80 IA OF THE ACT. IN THIS REGARD, HE HAS FOLLOWED THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V/S. JALNA SEEDS PROC ESSING AND REFRIGERATION CO. LTD., (2000), 246 ITR 156 (BOM) A ND OTHERS. AGAINST THIS ACTION OF THE LD CIT(A), THE REVENUE IS IN APP EAL BEFORE US. 3. IN SUPPORT OF THE GROUNDS, THE LD. D.R. SUBMITTE D THAT RELIANCE PLACED BY THE LD CIT(A) ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V/S. JALNA SEEDS PROCESSING AND RE FRIGERATION CO. LTD. (SUPRA) IS MISPLACED AS THE DECISION OF HONBLE BOM BAY HIGH COURT WAS PERSUADED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ESTATE OF RAJASTHAN V/S. RAJASTHAN AGRICULTURE INPU T DEALERS ASSOCIATION (1996), 5 SCC 479. HE SUBMITTED THAT DECISION OF H ONBLE SUPREME COURT IN THE CASE OF RAJASTHAN AGRICULTURE INPUT DEALERS ASSOCIATION (SUPRA) WAS NOT IN THE CONTEXT OF THE INCOME TAX ACT, SECTI ON 80IA OR 80 HH, BUT IN A TOTALLY DIFFERENT CONTEXT. THE ISSUE THERE W AS WHETHER A DEALER IN SEEDS WAS LIABLE TO OBTAIN LICENSE FOR TRADING IN IT IN THE CONTEXT OF LAW IN RAJASTHAN AT THAT TIME WHICH WAS APPLICABLE TO T RADING IN AGRICULTURAL PRODUCE. IN THIS CONTEXT, THE HONBLE SUPREME COU RT CONCLUDED THAT SEEDS DO NOT FALL IN THE CATEGORY OF AGRICULTURA L SEEDS OBSERVING THE SCHEDULES AND NOTIFICATIONS WHICH SUGGESTED THAT AG RICULTURE PRODUCE WERE FOOD-GRAINS FIT FOR HUMAN CONSUMPTION AND SEE DS RENDERED UNFIT FOR HUMAN CONSUMPTION AND WERE FOR SOWING. BASED ON TH IS CASE LAW, THE ITA . NOS 187 & 188/PN/2010 JINDAL SEEDS CO. PVT. LTD. A.Y.1999-00 & 2000-01 PAGE OF 7 3 HONBLE BOMBAY HIGH COURT NOTED THAT FOOD-GRAINS UN DERWENT PROCESSES BY WHICH IT CEASED TO BE FIT FOR HUMAN CONSUMPTION AND THE SAID COULD ONLY BE USED FOR SOWING. HENCE, SEEDS WERE DISTI NCT PRODUCT FROM FOOD-GRAINS. ON THIS BASIS, IT WAS HELD IN THE F ACTS OF THAT CASE THAT IT WAS MANUFACTURE. HENCE, THE CASE CITED IN JALNA SE EDS PROCESSING & REF. CO. LD. (SUPRA) IS DISTINGUISHABLE ON FACTS AND NOT APPLICABLE IN THE PRESENT CASE. HE SUBMITTED THAT IN THE PRESENT CAS E, THE ASSESSEE PURCHASED HIGHBRED SEEDS FROM MANUFACTURERS (MAINLY ONION SEEDS), DISTRIBUTED IT TO FARMERS FOR GERMINATION AND FURTH ER PRODUCTION OF SEEDS ON CONTRACT, THEN SORTS AND PACKS IT AND SELLS IT I N MARKET AFTER CERTIFICATION. IN THE CASE OF JALNA SEEDS PROCESSI NG & REFRIGERATION CO. LTD., BEFORE THE HONBLE BOMBAY HIGH COURT, IT WAS HELD THAT IN THAT CASE THE GRAINS WERE EDIBLE TO BEGIN WITH AND WERE SUBJE CTED TO PROCESSES TO MAKE THEM SEEDS, RENDERING IT UNFIT FOR HUMAN CONSU MPTION, SUITABLE ONLY FOR CULTIVATION. THUS, THEY HELD THAT A NEW P RODUCT WAS PROCESSED AND HENCE IT WAS A CASE OF MANUFACTURE. IN THE PR ESENT CASE OF THE ASSESSEE, THE SEEDS ARE NOT FIT FOR HUMAN CONSUMPTI ON TO BEGIN WITH IS AN ACCEPTED FACT BY THE LD CIT(A). THE LD. D.R. PLAC ED RELIANCE ON THE FOLLOWING DECISIONS : I) CIT V/S. VENKATESHWARA HATCHERIES (P) LTD., 237 ITR 174(SC) II) TITANOR COMPONENTS LTD. V/S. DCIT (2000), 72 I TD 514 (DEL ) III) CIT V/S. HINDUSTAN METAL REFINING WORKS (P) L TD., (1981), 128 ITR 472 (CAL.) IV) NIEMLA TEXTILE FINISHING MILLS P LTD. V/S. ITO 152 ITR 429 (PUN. & HAR.) (F.B.) 4. THE LD. A.R., ON THE OTHER HAND, TRIED TO JUSTI FY THE FIRST APPELLATE ORDER ON THE ISSUE WITH THIS SUBMISSION THAT IT IS FULLY COVERED BY THE DECISION OF HONBLE JURISDICTIONAL BOMBAY HIGH COUR T IN THE CASE OF CIT V/S. JALNA SEEDS PROCESSING AND REFRIGERATION CO. L TD. (SUPRA), TO WHICH ITA . NOS 187 & 188/PN/2010 JINDAL SEEDS CO. PVT. LTD. A.Y.1999-00 & 2000-01 PAGE OF 7 4 THE PUNE BENCH OF THE TRIBUNAL IS BOUND WITH. SHE SUBMITTED THAT THE LD CIT(A) HAD DEALT WITH THE ISSUE IN DETAILS MEETING WITH ALL THE OBJECTIONS RAISED BY A.O AFTER CONSIDERING THE REPLY OF ASSESS EE TO THOSE OBJECTIONS. SHE SUBMITTED FURTHER THAT ALL THE 7 STEPS OF PROCE SSING WHICH WERE INVOLVED IN THE CASE OF JALNA SEEDS PROCESSING AND REFRIGERATION CO. LTD. FOR PROCESSING SEEDS FOR THE PURPOSE OF CULTIVATION HAVE BEEN FOLLOWED IN THE CASE OF ASSESSEE ALSO AND MERELY BECAUSE IN THE CASE OF ASSESSEE THE GRAINS WERE NOT EDIBLE TO BEGIN WITH IS NOT SUFFICI ENT TO DENY THE ELIGIBILITY OF BENEFIT OF DEDUCTION U/S. 80IA TO THE ASSESSEE. THE LD. A.R. POINTED OUT FURTHER THAT FACTORY AND BUILDING OF THE ASSESS EE IS LOCATED IN MIDC ZONE AT JALNA AND REGISTERED AS A SMALL SCALE INDUS TRY FOR MANUFACTURING HYBRID SEEDS. THE ASSESSEE COMPANY IS ALSO REGISTE RED UNDER AGRICULTURE DEPARTMENT OF MAHARASHTRA AS PROCESSOR OF SEEDS AN D AS ON 31 ST MARCH 1999, IT HAD PLANT & MACHINERY OF GROSS VALUE OF RS . 10,21,362/- ON WHICH DEPRECIATION WAS ALLOWED. SHE SUBMITTED THAT BEFORE THE AUTHORITIES BELOW, THE ASSESSEE HAD SUBMITTED THAT THE ASSESSEE COMPANY PURCHASES BREEDER SEEDS FROM AGRICULTURAL UNIVERSIT IES AND THEN ALLOT IT TO THE FARMERS FOR GROWING UNDER THE TECHNICAL SUPERVI SION OF THE ASSESSEE. AFTER BEING TESTED FOR A QUALITY, THE SEEDS ARE CO LLECTED FROM THE FARMERS AND UNDERGO VARIOUS MANUFACTURING PROCESSES SUCH AS GRADING, CHEMICAL TREATMENT AND SORTING. THEREAFTER, SAMPLES ARE SEN T TO GOVERNMENT SEEDS CERTIFICATION AGENCIES AND ONCE THESE SEEDS A RE CERTIFIED AND APPROVED, THEY ARE AUTOMATICALLY WEIGHED AND PACKED IN THE DESIRED QUANTITY FOR SALE IN THE MARKET. SHE ALSO PLACED R ELIANCE ON THE FOLLOWING DECISIONS : 1. INDIAN CINE AGENCIES VS. CIT (2009), 308 ITR 98 (SC)- 2. CIT VS. ORACLE SOFTWARE INDIA LTD.,(2010) 320 ITR 546 (SC) 3. ASPINWAL & CO. LTD., VS. CIT (2001), 251 ITR 32 3 (SC) 4. ITO VS.ARIHANT TILE & MARBLES (P) LTD.(2010), 3 20 ITR 79 (S.C) 5. CIT VS. EMPTEE POLY YARN LTD. (2010),320 ITR 665(SC) ITA . NOS 187 & 188/PN/2010 JINDAL SEEDS CO. PVT. LTD. A.Y.1999-00 & 2000-01 PAGE OF 7 5 6. ITO VS. JALNA SEEDS PROCESSING & REFRIGERATION C O. LTD.,(2000), 246 ITR 156 (BOM) 5. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND THAT THE LD CIT(A) HAS DEALT WITH THE ISSUE IN DETAIL. BEFORE THE LD CIT( A), THE ASSESSEE TRIED TO MEET OUT THE OBJECTIONS RAISED BY THE A.O BASED ON WHICH THE DISALLOWANCE WAS MADE. THE LD CIT(A) CALLED REMAND REPORT ON THOSE SUBMISSIONS FROM THE A.O AND AGAIN GAVE OPPORTUNIT Y TO THE ASSESSEE TO MAKE REJOINDER TO THOSE REPLY OF THE A.O. IN HIS REPORT DATED 30.9.2009, BEFORE THE LD CIT(A), THE A.O POINTED OUT THAT IN M ANUFACTURING PROCESS OF SEEDS, 7 STAGES ARE REQUIRED AS PER THE DECISION OF HONBLE BOMBAY HIGH COURT IN ITS DECISION IN THE CASE OF ITO V/S. JALNA SEEDS PROCESSING AND REFRIGERATION CO. LTD. (SUPRA), WHEREAS THE ASS ESSEE APPLIED ONLY 3 STAGES I.E. GRADING, SEPARATION AND CHEMICAL TREATM ENT. IN ITS SUBMISSION, TO THE SAID REPORT OF THE A.O , THE ASSESSEE HAS ME NTIONED THAT EVEN IN THE CASE OF ASSESSEE, PROCESSING OF RAW SEEDS UNDER GO 7 STAGES. IN THE CASE OF JALNA SEEDS PROCESSING AND REFRIGERATION CO . LTD. (SUPRA), THE HOBBLE BOMBAY HIGH COURT WHILE APPROVING THE DECIS ION OF TRIBUNAL, FOR HOLDING THE ASSESSEE ELIGIBLE FOR DEDUCTION U/S. 80 HH HAS BEEN PLEASED TO NOTE THE FOLLOWING STAGES OF PROCESS THROUGH WHICH RAW SEEDS HAD UNDERGONE IN THE SAID CASE : 1) CONVEYANCE OF RAW SEEDS THROUGH AN ELEVATOR INTO THE SEED PRE-CLEANER. 2) THE SEEDS TO COME OUT OF THE PRE-CLEANER AND INT O A MACHINE WHICH SEPARATE THE STONES FROM THE SEEDS. 3) FINE CLEANING OF THE SEEDS. 4) THESE SAID SEEDS TO GO THROUGH THE GRAVITY SE PARATOR MACHINES WHICH BIFURCATE THE SEEDS ACCORDING TO SPECIFIC WEI GHT. 5) POST PROCESSING AND CERTAIN TEST TO BE CARRIED O UT LIKE PHYSICAL TESTING, PHYSIOLOGICAL TESTING AND GENETIC TESTING. ITA . NOS 187 & 188/PN/2010 JINDAL SEEDS CO. PVT. LTD. A.Y.1999-00 & 2000-01 PAGE OF 7 6 6) ASSESSING THE INTENSITY OF A SUITABLE DOZES AND SEED TREATMENT (ALSO INVOLVES USE OF CHEMICALS). 7) WEIGHING THE TREATED SEEDS IN AUTOMATIC WEIGHIN G MACHINES. THE LD CIT(A) AFTER DETAILED DISCUSSION ON THE ISSU E HAS NOTED HIS FINDING FROM PAGE NO. 13 TO 17 OF THE FIRST APPELLATE ORDER DISCUSSING THEREIN THAT IN THE CASE OF PRESENT ASSESSEE ALSO THE SEEDS UNDE RGO ALL THE ABOVE 7 STAGES UP-TO WEIGHMENT AND PACKING OF THE PROCESSED SEEDS. THE SAME HAS NOT BEEN SPECIFICALLY REBUTTED BY THE REVENUE B EFORE US. UNDISPUTEDLY, THE ASSESSEE HAS BEEN REGISTERED AS A SMALL SCALE INDUSTRY FOR MANUFACTURING OF HYBRID SEEDS AND IT IS ALSO REGISTERED UNDER AGRICULTURAL DEPARTMENT OF MAHARASHTRA AS PROCESSOR OF SEEDS. AS ON31ST MARCH 99, IT HAD PLANT & MACHINERY OF GROSS VALUE O F RS. 1021362/- ON WHICH DEPRECIATION WAS ALLOWED. AT PAGE 12 & 13 OF THE FIRST APPELLATE ORDER, THE LD CIT(A) HAS REPRODUCED THE LIST OF MAC HINERY IN A.Y. 1999- 2000 AND 2000-01 AS WELL AS REGARDING SEED TREATMEN T GIVEN BY THE ASSESSEE. UNDISPUTEDLY, WE ARE BOUND BY THE DECISI ON OF HONBLE JURISDICTIONAL HIGH COURT ON THE ISSUE AND IT IS BE YOND OUR JURISDICTION TO MAKE DISSECTION THEREOF AS TO HOW THE HONBLE HIGH COURT WAS PERSUADED TO DECIDE THE ISSUE IN A PARTICULAR WAY. MERELY BE CAUSE IN THE CASE OF JALNA SEEDS PROCESSING AND REFRIGERATION CO. LTD. ( SUPRA) BEFORE THE HONBLE BOMBAY HIGH COURT THE RAW GRAINS WERE EDIBL E TO BEGIN WITH WHEREAS IN THE CASE OF PRESENT ASSESSEE, THE RAW SE EDS WERE NOT EDIBLE TO BEGIN WITH, WILL NOT DITHER THE APPLICATION OF THE RATIO LAID DOWN BY THE HONBLE BMBAY HIGH COURT IN THE DECISION THAT THE ASSESSEE WAS ELIGIBLE FOR THE CLAIMED RELIEF SINCE IN THE PROCESSING OF S EEDS BY THE ASSESSEE, THE RAW SEEDS HAD UNDERGONE VARIOUS STAGES, TO MAKE T HEM MARKETABLE AND FIT FOR CULTIVATION. IN THE PRESENT CASE BEFORE US , THE ASSESSEE HAD ALSO INVOLVED ALL THE 7 STAGES NOTED BY THE HONBLE BOM BAY HIGH COURT TO ITA . NOS 187 & 188/PN/2010 JINDAL SEEDS CO. PVT. LTD. A.Y.1999-00 & 2000-01 PAGE OF 7 7 PROCESS THE SEEDS INTO A MARKETABLE LOT FIT FOR CUL TIVATION. THUS A DIFFERENT COMMODITY EMERGES AFTER THE RAW SEEDS UND ERGO DIFFERENT STAGES. WE ALSO FIND STRENGTH FROM THE ABOVE CITED DECISIONS OF THE HONBLE SUPREME COURT LAYING DOWN A RATIO IN CASES OF DEDUCTION CLAIMED UNDER SECTION 80IA THAT THE TERM MANUFACTURE IMPL IES A CHANGE BUT EVERY CHANGE IS NOT MANUFACTURE. HOWEVER, IF AN OPE RATION/PROCESS RENDERS A COMMODITY OR ARTICLE FIT FOR USE FOR WHIC H IT WAS OTHERWISE NOT FIT, THE OPERATION/PROCESS FALLS WITHIN THE MEANING OF THE WORD MANUFACTURE. WE, THUS, RESPECTFULLY FOLLOWING TH E RATIO OF DECISION LAID DOWN BY THE HONBLE JURISDICTIONAL BOMBAY HIGH CO URT ON THE ISSUE IN THE CASE OF CT V/S. JALNA SEEDS PROCESSING AND REFR IGERATION CO. LTD. (SUPRA) HOLD THAT THE ASSESSEE IS VERY MUCH ELIGIBL E FOR THE CLAIMED DEDUCTION U/S. 80IA OF THE ACT, WHICH HAS BEEN RIGH TLY ALLOWED BY THE LD CIT(A). THE FIRST APPELLATE ORDER IN THIS REGARD IS THUS UPHELD. THE GROUNDS ARE THUS REJECTED. 6. CONSEQUENTLY, APPEALS ARE DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 5TH AU GUST 2011. SD/- SD/- ( G.S. PANNU ) ACCOUNTANT MEMBER ( I.C. SUDHIR ) JUDICIAL MEMBER PUNE, DATED THE 5TH AUGUST, 2011 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-, AURANGABAD 4. THE CIT(A)- AURANGABAD 5. THE D.R. A BENCH, PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE